Finance Choices
New Loan Rules to help make things clearer
After tommorrow consumers will have a new level of clarity on their loan agreements and be given up-front information to help them shop around for the best deal, the Department of Trade and Industry has said.
The changes, which will force lenders to provide information including the total amount repayable on a loan, have been welcomed by consumer groups.
"With debt now affecting a wider spectrum of people - including the better off - and personal bankruptcy figures on the increase, these new obligations on lenders are extremely welcome," said Claire Whyley, deputy director of policy at the National Consumer Council.
"Lenders must now make sure they don't pull the wool over people's eyes from start to finish of a credit deal," she added.
Consumer Minister Gerry Sutcliffe added: "Hidden payments and lack of clarity are very unhelpful for people trying to manage their credit commitments, which is why we've brought in these changes.
"The pre-contractual information will help people shop around and make informed choices between the different products available to them, and the new level of clarity on loan agreements will mean that no-one is in the dark about what they are signing up for."
From today lenders are required to provide the following information:
- Pre-contractual information for borrowers - this should set out the main factors of the loan, including: total amount borrowed, total amount repayable, amount and frequency of repayments, APR, the cost of any default penalties and examples of early settlement charges;
- A similar list of clear information displayed prominently on the loan agreement itself;
- Separate information on the loan agreement about any additional payment protection insurance, with an additional signature box for the borrower so they can be clear what they are signing up for.
Other rules coming into effect today give borrowers who want to settle a loan early what the DTI calls a fairer deal. Lenders will still be able to recoup some administration costs for early repayments, but the burden on consumers will be lowered.
The changes, which will force lenders to provide information including the total amount repayable on a loan, have been welcomed by consumer groups.
"With debt now affecting a wider spectrum of people - including the better off - and personal bankruptcy figures on the increase, these new obligations on lenders are extremely welcome," said Claire Whyley, deputy director of policy at the National Consumer Council.
"Lenders must now make sure they don't pull the wool over people's eyes from start to finish of a credit deal," she added.
Consumer Minister Gerry Sutcliffe added: "Hidden payments and lack of clarity are very unhelpful for people trying to manage their credit commitments, which is why we've brought in these changes.
"The pre-contractual information will help people shop around and make informed choices between the different products available to them, and the new level of clarity on loan agreements will mean that no-one is in the dark about what they are signing up for."
From today lenders are required to provide the following information:
- Pre-contractual information for borrowers - this should set out the main factors of the loan, including: total amount borrowed, total amount repayable, amount and frequency of repayments, APR, the cost of any default penalties and examples of early settlement charges;
- A similar list of clear information displayed prominently on the loan agreement itself;
- Separate information on the loan agreement about any additional payment protection insurance, with an additional signature box for the borrower so they can be clear what they are signing up for.
Other rules coming into effect today give borrowers who want to settle a loan early what the DTI calls a fairer deal. Lenders will still be able to recoup some administration costs for early repayments, but the burden on consumers will be lowered.
posted by Bruce Wayne at 1:20 PM
New Loan Rules to help make things clearer
1 Comments:
I thought that confusion was all part of the plan. If these things were made simple to understand people could do it themselves, rather than pay someone else to. Here's a related point - If I go to a financial advisor to arrange some kind of loan, that advisor will get a commission from the providor. But if I arrange the commission directly, can I claim the commission? I rather doubt it.
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